1.5. Preparation of financial statements
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 637 questions
Bayliss Limited is a retailer of ladies’ fashion material. The following trial balance has been extracted from the books of account at 31 December 2015: Dr $ Cr $ 5% debentures (2017) 80 000 Administrative expenses 205 000 Cash and cash equivalents 32 000 Distribution costs 197 000 Dividends paid 10 000 General reserve 21 000 Interest paid 13 000 Inventory at 1 January 2015 98 000 Non-current assets at cost / valuation Land and buildings 185 000 Plant and machinery 204 000 Provision for depreciation Buildings 23 000 Plant and machinery 94 000 Ordinary shares of $0.50 each fully paid 140 000 Other payables 7 000 Other receivables 3 000 Purchases 480 000 Retained earnings 61 000 Revenue 984 000 Share premium 3 000 Trade payables 59 000 Trade receivables 109 000 1 504 000 1 504 000 Additional information Inventory at 31 December 2015 is valued at a cost of $105 000. Land is included in the trial balance at a value of $135 000. It is to be revalued to $150 000 at 31 December 2015. Depreciation for the year ended 31 December 2015 is to be provided as follows: Buildings – 2% per annum using the straight-line method Plant and machinery – 10% per annum using the reducing balance method. All annual depreciation is to be charged to administrative expenses. Trade receivables includes a debt of $9000 which is to be written off to administrative expenses at 31 December 2015. The directors wish to make provision for doubtful debts of 3% of trade receivables. The adjustment should be charged to administrative expenses. On 31 December 2015, Bayliss Limited made a bonus issue of shares on the basis of one ordinary share for every twenty ordinary shares held. The company policy is to leave reserves in their most flexible form. No entries have been made in the books of account in respect of the bonus issue. Debenture interest has been paid to 30 September 2015. REQUIRED Prepare the income statement for Bayliss Limited for the year ended 31 December 2015.
9706_s16_qp_23
THEORY
2016
Paper 2, Variant 3
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B Limited is a private limited company trading as a wholesaler of garden equipment. The draft trial balance at 30 June 2016 has been extracted from the books of account and is shown below. Debit Credit $ $ Bank loan 26 400 Bank 14 040 Cash Directors’ remuneration 53 200 Fixtures and fittings Cost 18 110 Provision for depreciation at 1 July 2015 5 310 Land and buildings Cost 135 000 Provision for depreciation at 1 July 2015 21 840 Motor vehicles Cost 41 600 Provision for depreciation at 1 July 2015 19 200 Interest paid 5 920 Inventory at 1 July 2015 62 400 Office costs 18 330 Property costs 21 940 Purchases 268 200 Retained earnings 30 570 Revenue 563 800 Selling and distribution costs 36 120 Share capital (ordinary shares of $1 each) 60 000 Trade payables 39 810 Trade receivables 71 000 Wages and salaries 48 500 780 970 780 970 Additional information The value of inventory at 30 June 2016 was $70 300 at cost. Land and buildings at 30 June 2016 were as follows: $ Land 70 000 Buildings 65 000 Depreciation is to be provided as follows: Asset Annual Rate Method Charge to Fixtures and fittings 15% Reducing balance Office costs Buildings 2% Straight-line Property costs Motor vehicles 25% Reducing balance Selling and distribution costs Wages and salaries are to be charged as follows: Selling and distribution costs 60% Office costs 40% B Limited took out a 5% debenture (repayable between 2021 and 2025) for $50 000 on 30 June 2016 and repaid the bank loan in full. Neither of these transactions has yet been recorded in the books of account. A prepayment of $1240 is to be accounted for on property costs at 30 June 2016. An accrual of $2680 is to be accounted for on selling and distribution costs at 30 June 2016. The directors require a provision for doubtful debts to be created representing 2% of trade receivables at 30 June 2016, to be charged to office costs. REQUIRED Prepare the income statement for the year ended 30 June 2016. Use the space on the next page for your workings. B Limited Income Statement for the year ended 30 June 2016 $ $ Revenue Cost of sales Opening inventory Purchases Closing inventory Gross profit Deduct: expenses Directors’ remuneration Office costs Property costs Selling and distribution costs Profit from operations Finance costs Profit for the year Use this space for your workings. Prepare an extract showing the current assets section of the statement of financial position at 30 June 2016. B Limited Extract from Statement of Financial Position at 30 June 2016 Explain why a company should provide for depreciation on its non-current assets. Explain two differences between ordinary shares and preference shares.
9706_s17_qp_22
THEORY
2017
Paper 2, Variant 2
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Warren is a sole trader. He started trading on 1 February 2016. During the year ended 31 January 2017 he did not keep detailed accounting records but he has provided the following information: $ Revenue 248 758 Carriage inwards 12 371 Carriage outwards 5 873 Returns inwards 6 250 Returns outwards 11 875 Goods taken for own use 2 246 Inventory at 31 January 2017 27 450 Warren applies a 50% mark-up on cost. REQUIRED Prepare the trading section of the income statement for the year ended 31 January 2017. Explain two advantages of maintaining control accounts. Additional information Whilst preparing his accounts, Warren discovered the following: Goods costing Warren $2400 had been sent to a customer on a sale or return basis on 29 January 2017. The goods had been invoiced with the usual mark-up, but the customer had not yet decided to keep them. Trade receivables were shown as $49 532, but irrecoverable debts of $572 had not been written off and a provision for irrecoverable debts of 5% was required. REQUIRED Explain how these transactions would affect the financial statements for the year ended 31 January 2017.
9706_s18_qp_23
THEORY
2018
Paper 2, Variant 3
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